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Wolff & Samson PC
Counsellors At Law Government and Regulatory Affairs "Cooling Off" period for former employees of prospective vendors should be implemented
While seemingly obvious, the adoption of this formal preclusion was remarkable as it was brand new to state contracting, even though local contracts have been subject to a mirror-image provision since 1991. See Local Government Ethics Law (LGEL) , N.J.S.A. 40A:9-22.5(d). Although the new law closed the loophole between the treatment of contracts at the state versus the county or municipal level, regardless, neither this new law nor the LGEL go far enough to protect the integrity of government contracting. Indeed, although financial and fami1ial interests are now uniformly defined by statute, there is still no prohibition or even a "cooling off' period preventing other interested parties, such as the former employees of prospective vendors, from participating, either as employees or consultants, in the evaluation of proposals and the award of contracts. Without such a "cooling off" period, favoritism and unfair advantage, both real and perceived, will continue to prevail. This relatively new and important legislative effort should be acknowledged, however, it is both surprising and disappointing that the LGEL, which was enacted in 1991, is still broader than the recently enacted state statute. For example, the LGEL provides that:
Thus, the LGEL not only precludes individuals who have a direct involvement from participating in the evaluation process, but it also prohibits the involvement of individuals with an "indirect" interest as well. More importantly, the regulations implementing the LGEL expressly require each person who is involved in evaluating a proposal to assess his/her affiliations and financial interests to determine whether a conflict of interest exists. Those regulations unequivocally state that
Despite the new uniformity at the statutory level, the above regulations only pertain to county and municipal contracts. No such regulations have been promulgated to implement the new state statute. Accordingly, there still is no requirement that state evaluators certify in advance of their review of bids or proposals that they have no conflict of interest. This continuing disparity is inexplicable. Moreover, there are a number of potential conflicts that seem to have escaped notice. The 2006 statute requires that persons with knowledge, specialized training, or relevant professional experience participate in the evaluation of bids and award of the contract and that the identity of those persons, including their qualifications and experience, be supplied to the State Treasurer. N.J.S.A. 52:34-10.3. Obviously, evaluations and recommendations should be made by appropriately qualified people but, by virtue of this requirement, the statute expands the class of individuals with potential conflicts of interest, namely former employees of potential vendors. Indeed, because the statute only precludes those with personal, financial, or family interests in any vendor or in the contract from participating, the legislative efforts to close one loophole may have inadvertently resulted in the creation of another. In some respects, this is ironic. Nearly 50 years ago, the N.J. Supreme Court warned that "an actual conflict of interest is not the decisive factor, nor is whether the public servant succumbs to temptation, but rather whether there is a potential for conflict." Wyzykowski v. Rizas, 132 N.J. 509,523 (1993) (citing Van Itallie, 28 N.J. at 268; Aldom v. Borough of Roseland, 42 N.J. Super. 495, 503 (App. Div. 1956)). Although former employees may be less likely to have an actual conflict, this new statute fails to address the very perception issue raised by the N.J. Supreme Court decades ago - it is not just the actual conflict, it is the potential for one that should be avoided at all costs. Griggs v. Borough of Princeton, 33 N.J. 207, 219 (1960); Aldom, 42 N.J. Super. at 502; Zell v. Borough of Roseland, 42 N.J. Super. 75, 82 (App. Div. 1956). Obviously, the disparity in the regu1ations applicable to state versus county and municipal contracts must be addressed. At a minimum, the Department of the Treasury must promulgate regulations implementing the new statutory scheme that specifically address the absence of a "no-conflict" certitication for state contract evaluators. In addition, the regulations under the LGEL requiring those individuals evaluating contracts to assess whether a potential conflict exists and to prepare affidavits of no-conflict in advance of their participation are plainly inadequate. In fact, their "cont1icts" analysis is limited to the "personal interest, financial or familial interest" standard, leaving an uncomfortably wide margin for either actual abuse or the perception of abuse and favoritism. N.J.A.C. 34-4.3(e) and (f). Not only are detailed and amended regulations a necessity, the Legislature also must amend both the 2006 law and the LGEL to include a "cooling off" period for former employees of prospective vendors. The implementation of a "cooling off" period will eliminate the potential that such a person will engage in favoritism in the bidding process and diminish the perception that it exists. Cooling off periods can be one important element of the solution and are not unknown in government; indeed, such provisions have been fixtures in various legislative enactments for years. In 1990, the Assembly State Government Committee noted the need for a cooling off period in its Statement regarding the LGEL. The Committee specifically provided that a local authority shall not, for a period of one year following the termination of one of its employees, award a contract to that fonner employee, permit that former employee to appear before the authority, or employ that individual except pursuant to open competitive examination. Senate No. 2027-L.1991 , c.29, at 4 (N.J. 1990). Likewise, N.J.S.A. 52:13D-17 also provides for a post-employment restriction for State officers and employees who are precluded from representing, appearing or negotiating on behalf of another party before the State agency for whieh he or she formerly was employed and with respect to any matter in which he/she had substantial involvement during the course of his/her employment. N.J.S.A. 52: 13D-17. If State employees are banned from undertaking certain kinds of employment following the termination of their service for the government, it stands to reason that former private sector employees who enter government service and may have a potential conflict of interest should be formally precluded from participating in anything to do with the their former employers efforts to secure government contracts. Because the Title 52 enactment is still relatively new, it is not surprising that the courts have not been asked to evaluate a conflict or potential conflict in a contract award made pursuant to it. Although the courts have been actively engaged in the interpretation of the LGEL, in recent years, even that judicial review has produced very few reported decisions. In the meantime, regardless of whether they are caused by simple ignorance of the law, negligence or conspiracy, 'mistakes' continue to be made in the government contracting process and allegations of fraud, abuse and favoritism inevitably follow. The result is the same: the public lacks confidence in government and the integrity of government contracting. Restoring public confidence in government will be difficult and the progress is likely to be incremental. The Legislature can do its part by addressing some of the obvious loopholes in these interrelated statutory provisions. Indeed, by requiring state evaluators to attest to the absence of an actual or potential conflict and mandating a "cooling off period" of one year before the former employees of prospective vendors can participate in the government contracting process, the Legislature can go a long way toward restoring confidence in public contracting. This article is reprinted with permission from the April 21, 2008 issue of the New Jersey Law Journal @2008 ALM Properties,lnc. Further duplication without permission is prohibited. All rights reserved. © |